Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: What is the tax treatment of amounts received through crowdfunding?
Position: Question of fact, and will depend whether the amounts are received as a gift or whether the amounts will constitute income from a source.
Reasons: Law.
XXXXXXXXXX 2020-083806
F. Savonarota
June 2, 2022
Dear XXXXXXXXXX,
RE: Tax treatment of funds received via crowdfunding
We are writing in response to your letter we received on January 27, 2020, concerning the tax treatment of amounts received through crowdfunding (“Contributions”) . More specifically, you asked whether the Contributions constitute taxable income or if it can be regarded as a gift and not subject to tax.
In the situation you described, your step-daughter and dependent, was diagnosed with Rhabdomyosarcoma, a cancer of the muscle and bones. In response to your family’s situation, your brother-in-law and sisters set up a Go Fund Me page. The funds raised for your step-daughter would go to providing treatment for her illness. As of January 27, 2020, the Contributions total $22,085.
Our comments
This technical interpretation provides general comments about the provisions of the Income Tax Act (“Act”) and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R12, Advance Income Tax Rulings and Technical Interpretations.
The Canada Revenue Agency (CRA) understands that crowdfunding is a way of raising funds for a broad range of purposes, using the internet, where conventional forms of raising funds might not be possible. Generally, the CRA does not consider there to be a difference for tax purposes between a person receiving funds directly from the contributors versus receiving funds through a crowdfunding platform.
Depending on the facts and circumstances, monies received by a taxpayer under a crowdfunding arrangement could represent a loan, capital contribution, gift, income, or a combination thereof. However, since the terms and conditions of these types of arrangements may vary greatly from one situation to another, the CRA’s approach is to evaluate each situation on a case-by-case basis before making a determination of the income tax consequences of a particular crowdfunding arrangement.
In certain situations, an amount that is received by a taxpayer under a crowdfunding arrangement may constitute a non-taxable windfall, gift, or voluntary payment for the person receiving it. The factors used to determine the nature of a particular payment that may be considered a windfall or gift are discussed in paragraphs 1.2 and 1.3 of Income Tax Folio, S3-F9-C1, Lottery Winnings, Miscellaneous Receipts, and Income (and Losses) from Crime (“Folio”) available on the CRA website.
Paragraph 1.3 of the Folio provides the following commentary on gifts and other voluntary payments:
- The term gift is not defined in the Act. In common law jurisdictions, the courts have said that a bona fide gift exists when:
- There is a voluntary transfer of property,
- A donor freely disposes of his or her property to a donee, and
- The donee confers no right, privilege, material benefit, or advantage on the donor or on a person designated by the donor.”
As stated in paragraph 1.4 of the Folio, amounts received as gifts (i.e., voluntary transfers of property for no consideration) are not subject to tax in the hands of the recipient.
It is a question of fact whether the Contributions would be considered a gift. However it would appear that the conditions described in paragraph 1.3 of the Folio are met such that the Contributions received for the benefit of a sick family member represents voluntary transfers of property for no consideration. Consequently, in our view the Contributions would likely be considered a gift and would not have to be included in the recipients income.
However. where an amount cannot be categorized as a windfall, gift, or other voluntary payment, the amount may be taxable under the Act if it constitutes income from a source for the recipient (for example, income from an office, employment, business, or property). Such a determination is always a question of fact.
We trust these comments will be of assistance.
Sandro D’Angelo, CPA, CMA
Acting Manager
Business and Employment Income Section
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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